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June 2008 | ifr special report | 9 SOVEREIGN BOND MARKETS ROUNDTABLE

Anne Leclercq, Belgian Debt Agency; Christophe Rivoire, HSBC; Angelo Proni, EuroMTS; Erik Wilders, Dutch State Treasury; Simon Maisey, JPMorgan; Jeffrey Hogan, BGC Partners; Peter Nijsse, Dutch State Treasury Agency ; Rachelle Horn, IFR; Michael Winfield, IFR; Enrique Ezquerra Martin, Spanish Treasury

should do and what kind of pricing may be attainable, although this is only under con- sideration at the moment I hasten to add. If we did do a US dollar transaction, it would be an addendum to our normal issuance programme, so it would not change the normal predictable programme we follow. In addition to the normal euro- denominated bonds we issue, we view US dollar issuance as an opportunity, one that could help us achieve cost efficiency. If I look at what Spain was able to do, it does appear to be very attractive. So we are really looking at that and hoping that we may be able to follow this example. There is, however, a whole docu- mentation process to overcome first. So, at any such time a decision is made to issue in US dollar format, it will depend on if the market is still there and if the asset swaps level remains attractive. We would hope the basis swap element may still be there, although there are other elements which are important in the overall decision to proceed. I think that the basis swap shift may not be there to stay forever, but probably for some months more.

Hogan: In addition it is sensible to keep in touch with the dollar investor base from the point of view of sovereigns and supra- national issuers. Earlier in the year investors were focusing on dollars because

the Fed was on the move. The Fed was showing leadership at a time of uncertainty, and the US dollar yield curve was steepening dramatically, so there were opportunities.

For example, when the Fed introduced their initial rescue packages, it was the dollar market that reacted quickest and the most violently and improved the most dra- matically. So to have a facility in place to take advantage of that when the dollar market was picking up was very sensible. Now, as the Fed's behaviour has changed and the markets are settling down, the need to lower rates is much less pronounced. Whether issuers who may not typically

invest in dollars will look at other currencies we will have to see, but I think in the first four months of this year there was a definite desire for low yield, highly rated dollar products, which may diminish over the course of the rest of the year. From a supranational or sovereign perspective, one of the things to be sensitive to is that the environment may change completely where there was a premium for low yield, high rated paper. As the markets equilibrate and desensitise to the concerns about credit, it's likely – certainly given historical spreads against corporates – that the demand is going to go completely to the other side, to the higher yield, more risky sector. This will create

additional strains on the sovereign and supra-sovereign community to continue to issue at desirable spreads.

Nijsse: We have concentrated on shorter dated issuance of euro commercial paper where prices are set in either pounds sterling, US dollars or euros. We have benefited from issuing in US dollar format in this way. But longer issuance is, of course, a judgment of whether you think it fits in with your issuance programme and issuer profile, even if it turns out to be a short-term opportunity. So it is a sort of choice: do you want to make use of short-term opportunistic borrowing, or do you want to do a longer term programme? So far, we don't have immediate plans, but we always look at all opportunities and we don't explicitly exclude it.

Maisey: I think there are very attractive funding rates at the moment. In terms of whether some of those things will persist, I think some of the currency basis – and even the level of the three sixes basis – are supply and demand driven. Some of these things are things that people didn't focus on before, so there are a number of idio- syncratic risks that no-one was really paying much attention to previously. So how long that lasts is very hard to tell and I don't think there is a "back to normal", where we just go back to the position

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